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Tenant Fee Ban

Posted by Velyana Goranova on March 19, 2019
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From the 1st of June 2019 letting agents and landlord can no longer charge fees to tenants. This is a controversial law. Of course, most tenants will be delighted, they will expect to save money and, in some instances pay smaller deposits. The average fees charged to tenants in the North West are £400; while in London these are significantly higher.

 

In brief, the new law will mean:

  1. Landlords will only be able to hold up to 5 weeks rent as a tenancy deposit (for houses rented for less than £50k pa, those over this price can take 6 weeks deposit).
  2. The holding deposit, to ensure the tenant application, can be no more than one weeks’ rent.
  3. All other payments will be banned with the exception of contractual default penalties (these include changes to tenancy, capped at £50, early termination of tenancy, late payment of rent, or loss of keys).
  4. N.B. This law will only apply to new tenancies signed after 1st of June 2019.

Landlords and agents who fail to abide by these rules can be fined £5000, if the offence is repeated within five years, they can be fined up to £30,000.

 

Of course, this presents a problem for landlords and letting agents, they still need to carryout references checks on tenants and will need to carry out the admin required to set up a new tenancy, but these costs will have to fall to the landlord. As a consequence, many expect rent to be increased to cover this expense. With an ever-increasing number of new measures leading to lower profit margins for landlords many will look to sell of their rental properties. Again, this will lead to greater competition for rentals and higher rents. So, have the government really resolved the problem?

 

David Cox, chief executive of Arla Propertymark believes that the tenant fees bill is “a sledgehammer to crack a nut.” He feels that agents and landlords will have to make up the loss of income somewhere and either standards will suffer, or rents will rise. According to research for Arla in March 2017 rents are set to increase by an average of £103 per year.

 

Although the Tenants Fee Ban might seems as sensible measure to prevent agents and landlords from overcharge tenants, a cap on the fees may have been a palatable approach allowing agents and landlords to charge a fair sum for work carried out. There are other measures which should be introduced to properly regulate this industry. Some of these are being considered at present; including minimum standards for rental properties and maximum timeframes within which essential repairs can be conducted. Theresa May has also pledged to allow access to a database of rogue landlords, at present this is only available to local authorities; however it should available to tenants and letting agencies. We hope these measures will be introduced in the near future and that a measured and sensible approach shall be taken, which does discriminate against landlords, tenants or letting agents.

 

 

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